• The shocking jobs report on Friday wasn’t as bad as it looked and was actually just fine, according to market veteran Ed Yardeni, who cited wage and workweek increases while attributing weak payroll gains to muted labor supply rather than waning demand. That’s as others on Wall Street have raised alarms about the U.S. economy nearing a recession.

Wall Street’s dreams for a bulletproof economy impervious to President Donald Trump’s trade war may have been shattered, but market veteran Ed Yardeni accentuated the positive in what was an otherwise dismal jobs report.

That’s as payrolls grew by just 73,000 last month, well below forecasts for about 100,000. Meanwhile, May’s tally was revised down from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000.

While Yardeni, president of Yardeni Research, acknowledged in a note Monday the report was a shocker, he maintained the labor market remains resilient.

“It’s hard to put a positive spin on this news, but not for us!” he wrote.

Yardeni pointed to solid increases in aggregate hours worked and the average workweek in the private sector. In addition, private-industry wages also saw healthy advances and hit record highs.

Meanwhile, he attributed some of the slowdown in payroll gains to the shrinking supply of workers instead of waning demand for workers.

The labor force has stopped growing in recent months amid Trump’s immigration crackdown. At the same time, gauges for labor demand have very closely tracked this supply trend so far this year, which is an unusual phenomenon, Yardeni explained.

“This implies that the weak gains in payrolls in recent months might have something to do with the supply of labor,” he added. “The demand for labor might have been temporarily weakened by employers’ holding off on hiring until Trump’s Tariff Turmoil.”

By contrast, JPMorgan economists interpreted the jobs data as an indication of weaker demand for workers.

In a note on Friday evening, they downplayed the increases in wages and average workweeks, while pointing out that hiring in the private sector has slowed to an average of just 52,000 in the past three months, with sectors outside health and education stagnating.

“We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan added. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory. In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.”

The note also warned the depressed job-growth pace is unlikely to sustain income gains.

Bank of America said in its own note Monday a shock to labor demand should lead to a slowdown in wage growth and hours worked. That didn’t happen. While it’s not clear demand is deteriorating faster than supply, BofA said the jobs data looks more like a supply than a demand shock so far.

For now, even though hiring has cooled sharply, there’s no sign of mass layoffs yet, and the unemployment rate has barely changed, bouncing in a tight range between 4% and 4.2% for more than a year.

The economy is still seen as holding up. The Atlanta Fed’s GDP tracker points to continued growth, though it’s expected to decelerate to 2.1% in the third quarter from 3% in the second quarter.

The supply-versus-demand question could be key in how the Federal Reserve responds, or not, to the jobs data. Given Monday’s big rally in the stock market and continued drop in Treasury yields, Wall Street is betting on Fed rate cuts soon.

JPMorgan said job creation is no longer solid, and that when combined with growing headwinds from Trump’s trade war, the recent data point to the Fed moving closer to lowering rates.

Meanwhile, BofA backed its forecast that the Fed won’t lower rates this year, and Yardeni similarly reaffirmed his view of a “none-and-done” scenario.

“That’s because we expect that the next batch of inflation indicators will show that tariffs are boosting consumer price inflation, especially of durable goods,” he added. “We also expect to see more signs of life in the labor market.”

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• U.S. stocks were poised for gains as futures on Sunday evening signaled a rebound after investors digested jobs data that upended their notions of what previously looked like a more resilient economy. Some analysts on Wall Street are warning that the U.S. is now on the brink of recession.

Markets were pointing toward a rebound Sunday evening after startling jobs data delivered a rude awakening to Wall Street bulls.

Futures tied to the Dow Jones Industrial Average reversed higher, rising 114 points, or 0.26%. S&P 500 futures were up 0.34%, and Nasdaq futures added 0.38%.

The yield on the 10-year Treasury climbed 3.3 basis points to 4.253% after plunging Friday on greater expectations for Fed rate cuts. The U.S. dollar was down 0.09% against the euro and down 0.29% against the yen.

Gold rose 0.17% to $3,405.70 per ounce. U.S. oil prices dropped 0.15% to $67.23 per barrel, and Brent crude fell 0.2% to $69.53, as OPEC+ announced another surge in production.

After investors marveled at how resilient the economy appeared in the face of President Donald Trump’s tariffs, it turns out conditions were actually much weaker, with job gains over the last three months averaging just 35,000.

Combined with separate indicators showing deterioration in consumer spending, housing, and manufacturing, the overall picture is one of an economy “on the precipice of recession,” according to Mark Zandi from Moody’s Analytics. That followed a similar warning from economists at JPMorgan.

Analysts have also raised concerns about the potential politicization of data after Trump’s firing of Erika McEntarfer, who headed the Bureau of Labor Statistics.

Others had previously sounded the alarm on glaring red flags in the economy. But in the days leading up to the jobs report, some top commentators were still trying to explain why doomsday predictions about Trump’s “Liberation Day” tariffs had yet to materialize.

On Thursday, former White House economic adviser Jason Furman attributed it in part to “tariff derangement syndrome.” And last Sunday, Rockefeller International Chair Ruchir Sharma said the negative effects of tariffs were likely being offset by other factors like the AI spending splurge and lower inflationary pressure from housing, cars and energy.

With Wall Street now more attuned to economic risks like Trump’s trade war, the tariffs that will go into effect on Thursday may get more scrutiny. That includes steeper duties on trading partners like Canada and Switzerland.

U.S. Trade Representative Jamieson Greer said Sunday that tariff rates are “pretty much set” and are unlikely to change in the coming days, though Trump had pushed back the last deadline to Aug. 7 from Aug. 1, which was also a delay from another deadline on July 9.

Meanwhile, the calendar of economic reports thins out in the coming week after several big ones last week. On Tuesday, the trade deficit for June comes out, providing an update on how much tariffs are impacting imports. On Thursday, second-quarter productivity is due.

Earnings season has passed its peak, but several top names will issue quarterly reports. Palantir Technologies reports Monday after securing a $10 billion software and data contract from the Army.

Chip giant Advanced Micro Devices will report on Tuesday—potentially offering hints at Nvidia’s results, which don’t come out until Aug. 27.

Other companies scheduled to release earnings in the coming week include Caterpillar, Disney, and McDonald’s. It will also be a busy time for pharmaceutical and biotech giants like Amgen, Pfizer, and Eli Lilly as Trump weighs steep tariffs on drugs.

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• Just as Wall Street was warming up to the hope that the U.S. economy was bulletproof amid President Donald Trump’s trade war, the recent batch of indicators has punctured that notion. But not everyone was surprised, as some economists had previously sounded the alarm on various red flags that are associated with downturns.

The recent batch of indicators has punctured the notion on Wall Street that the U.S. economy is bulletproof and can withstand headwinds like President Donald Trump’s trade war.

That was evident in Friday’s stock market selloff as the dismal jobs report and shocking downward revisions to earlier months raised recession fears.

But not everyone was surprised, as some on Wall Street had previously sounded the alarm on overoptimism and various red flags that are associated with downturns.

In a note on Tuesday, James St. Aubin, CIO of Ocean Park Asset Management, warned that investors were leaning too heavily on the narrative of economic resiliency.

The idea of a “Kevlar economy” had fueled complacency that was showing up in stretched valuations, tight credit spreads, and an underpricing of risk, he added, referring to the synthetic fiber used in bulletproof vests.

One of the risks is political pressure creeping into the Federal Reserve’s decision-making, St. Aubin said. For months, Trump and the other White House officials have demanded Fed rate cuts, even suggesting that cost overruns on a headquarters renovation project are grounds for Chairman Jerome Powell to be ousted.

Another risk is that stock market investors viewed tariffs as a temporary speed bump that would be offset by tax cuts and the tech sector’s capital spending splurge on AI. But St. Aubin pointed out that tariffs hit businesses unevenly, with some are far more exposed than others.

“If you believe in resiliency too much, you’re not being fully compensated for the risks you’re taking,” he added. “Something always goes wrong eventually — whether it’s a risk hiding in plain sight or something you couldn’t see coming.”

Consumer spending on services

To be sure, the U.S. economy had previously demonstrated surprising durability. In 2022, after the Fed launched its most aggressive rate-hiking campaign in more than 40 years, Wall Street widely assumed a recession would follow. But it never came, and inflation cooled sharply.

And earlier this year, economists feared Trump’s tariffs would fuel a big spike in inflation. But while some import-sensitive areas have seen an uptick, the overall rate has been more muted, so far.

However, a deeper dive into some of the headline numbers revealed troubling signs. Last month, economists at Wells Fargo pointed out that although discretionary spending on goods had held up, spending on services dipped 0.3% through May on a year-over-year basis.

“That is admittedly a modest decline, but what makes it scary is that in 60+ years, this measure has only declined either during or immediately after recessions,” they wrote in a note.

Spending on food services and recreational services, which includes things like gym memberships and streaming subscriptions, were barely higher. 

Meanwhile, transportation spending was down 1.1%, led by declines in auto maintenance, taxis and ride-sharing, and air travel, which had the steepest drop at 4.7%.

“The fact that households are putting off auto repair, not taking an Uber and cutting back or eliminating air travel points to stretched household budgets,” Wells Fargo said.

Housing market

In May, Citi Research recalled that the late economist Ed Leamer famously published a paper in 2007 that said residential investment is the best leading indicator of an oncoming recession.

“We would be wise to heed his warning,” Citi said. 

In fact, residential fixed investment shrank 4.6% in the second quarter, according to data released Wednesday, after contracting 1.3% in the first quarter.

And overall construction spending continued to decline in June, led by a steep plunge in new single-family homes. That’s as mortgage rates remain elevated, representing a major obstacle to affordability, while home prices are still high.

“Residential fixed investment is the most interest rate sensitive sector in the economy and is now signaling that mortgage rates around 7% are too high to sustain an expansion,” Citi said in May.

Labor market

Citi economists have long been among the less bullish on Wall Street, and before Friday’s startling payroll data, they had already sniffed out signs of weakness.

In particular, they flagged a dip in the labor force participation rate, which had suppressed the unemployment rate as it meant fewer people were looking for work.

Citi downplayed the notion that Trump’s immigration crackdown was primarily responsible for the lower participation rate. Instead, economists pointed to low hiring as an indication of weaker demand for workers.

On Friday, Citi saw its prior warnings play out and predicted Wall Street would start to come around.

“Softness that had been evident in details of the jobs report is now apparent in the headline numbers,” the bank said. “Markets and Fed officials should now more closely mirror our view that a low-hiring labor market, together with slowing growth create downside risk to employment and reduce the risk of persistent inflation.”

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• Indicators from the past week paint an overall picture of an economy on the edge of a downturn, according to Moody’s Analytics chief economist Mark Zandi. Not only is the labor market weakening, but consumer spending is flat while construction and manufacturing are shrinking, he warned, adding that the Federal Reserve will have a hard time reviving growth with inflation still above its target.

The shocking jobs report on Friday wasn’t the only red flag. Indicators from the past week paint an overall picture of an economy that’s headed for a downturn, according to Moody’s Analytics chief economist Mark Zandi.

After months of looking remarkably resilient in the face of President Donald Trump’s tariffs, the economic outlook has suddenly turned gloomier.

“The economy is on the precipice of recession. That’s the clear takeaway from last week’s economic data dump,” Zandi wrote in a series of posts on X on Sunday. “Consumer spending has flatlined, construction and manufacturing are contracting, and employment is set to fall. And with inflation on the rise, it is tough for the Fed to come to the rescue.”

Payrolls grew by just 73,000 last month, well below forecasts for about 100,000. Meanwhile, May’s tally was revised down from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000.

While Trump has claimed without evidence that the jobs data was “rigged” and fired the head of the agency that produces the report, Zandi noted that data often gets big revisions when the economy is at an inflection point, like a recession.

Separate reports also held warning signs. GDP rebounded more robustly than expected in the second quarter, but a metric that strips out the impact of foreign trade and looks instead at final domestic demand indicated slowing.

The personal consumption expenditures report showed core inflation accelerated to 2.8%, further above the Fed’s 2% target, and that consumer spending rose less than expected in June. Fed policymakers have held off on interest rate cuts as they wait to see how much tariffs impact inflation.

Meanwhile, construction spending continued to decline in June amid a sharp drop in single-family homes. And the Institute for Supply Management’s manufacturing activity index for July dipped, indicating the sector contracted at a quicker pace.

For now, the Atlanta Fed’s GDP tracker points to continued growth, though it’s expected to decelerate to 2.1% in the third quarter from 3% in the second quarter.

There are also no signs of mass layoffs, and the unemployment rate has barely changed, bouncing in a tight range between 4% and 4.2% for more than a year.

But Zandi said the jobless rate is still low only because the size of the labor force has stagnated. That’s as the foreign-born workforce has plunged by 1.2 million in the last six months amid Trump’s immigration crackdown, while the overall labor participation rate has slipped.

As the supply of labor has softened, so has the demand. Zandi pointed to an “economy-wide hiring freeze, particularly for recent graduates.” The upshot is that the so-called neutral level of job gains needed to absorb new workers—and keep the unemployment rate steady—is now much lower.

“It’s no mystery why the economy is struggling; blame increasing U.S. tariffs and highly restrictive immigration policy,” Zandi added. “The tariffs are cutting increasingly deeply into the profits of American companies and the purchasing power of American households. Fewer immigrant workers means a smaller economy.”

On Friday, economists at JPMorgan similarly sounded the alarm on a potential downturn. They noted that jobs data show hiring in the private sector has cooled to an average of just 52,000 in the last three months, with sectors outside health and education stalling.

Coupled with the lack of any signs that unwanted separations are surging due to immigration policy, this is a strong signal that business demand for labor has cooled, they explained.

“We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan added. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory. In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.”

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• Congress created America’s central banking system with the Federal Reserve Act in 1913 and can amend the law to modify the Fed’s authority or mission. That’s as the Fed faces questions about its independence and role in the economy amid pressure from the White House to lower interest rates.

The White House’s relentless pressure on the Federal Reserve has kindled a debate on the central bank’s independence and role in the economy.

While President Donald Trump has backed off earlier suggestions that he would fire Fed Chairman Jerome Powell, he continues to demand lower interest rates.

The surprise announcement Friday that Governor Adriana Kugler will step down next week, well ahead of her expected departure in January when her term on the board of governors expires, gives Trump an early start on picking Powell’s replacement.

The president has already said he would nominate a new chair who would lower rates. That’s despite the continued resistance from Powell and most other policymakers to keep rates steady as Trump’s tariffs make their way through the economy and put upward pressure on inflation.

Amid the standoff between the White House and the Fed, Congress has the power to modify the central bank’s authority and mission.

Wharton finance professor Jeremy Siegel highlighted this potential last month, when he told CNBC that Powell may need to resign in order to preserve the Fed’s long-term independence.

His reasoning: if the economy stumbles, then Trump can point to Powell as the “perfect scapegoat” and ask Congress to give him more power over the Fed.

“That is a threat. Don’t forget, our Federal Reserve is not at all a part of our Constitution. It’s a creature of the U.S. Congress, created by the Federal Reserve Act 1913. All its powers devolve from Congress,” Siegel explained. “Congress has amended the Federal Reserve Act many times. It could do it again. It could give powers. It could take away powers.”

In fact, Siegel’s fears may be realized. The economy has flashed sudden warning signs, most notably Friday’s shocking jobs report that showed payroll gains were much weaker than previously thought.

Economists at JPMorgan even cautioned that the report flashes a recession alert as it suggests a sharp decline in labor demand from businesses.

Amending the Fed’s dual mandate

Congress’ leverage over the Fed is not lost on lawmakers. At an Axios event this past week, Sen. Bernie Moreno, R-Ohio, was asked if the Federal Reserve Act needs to be changed or updated.

“There’s a lot of things that we should talk about,” he replied. “For example, should the Federal Reserve be paying interest rates to banks for their overnight deposits? I think that’s a legitimate question that we need to examine a little bit more.”

In addition to paying U.S. banks interest on their reserves, he pointed out that the Fed pays foreign banks to hold money in America, adding “I don’t know that that’s a good plan. Maybe it needs to be lowered.”

Moreno also flagged the Fed’s dual mandate of full employment and price stability, which was established in 1977 when Congress amended the Federal Reserve Act.

He said Congress should take another look at the Fed’s mission, suggesting the mandate should be modified to target maximum employment “at the highest possible wage.”

As for the other piece of the dual mandate, Moreno also said “we need to make certain that we understand what they’re looking at when it comes to inflation.” 

As an example, he noted Powell’s failure to hike rates sooner during the pandemic, when there was a supply shock and a spike in demand from all the stimulus. He also pointed to the Powell’s current reluctance to lower rates despite no indications yet that tariffs have caused a big spike in inflation and while taxes are coming down.

“So it’s, ‘how do you analyze this?'” Moreno explained. “And I think he’s looking at from a very political lens. He should be looking at from a very apolitical lens.”

For his part, he also told Axios earlier in the conversation that he “absolutely” believes in central bank independence but added that Powell could be legitimately fired for being “extraordinarily incompetent.”

Fed independence

Of course, the Fed isn’t completely devoid of any political influence. The president nominates and the Senate confirms members the board of governors, including the chair and vice chair. The Fed chair also must testify before Congress regularly and gets grilled by lawmakers.

At the same time, the Fed was structured to be somewhat insulated from political pressures. Governors have 14-year terms that expire on a staggered scheduled, preventing a single president from completely revamping the board all at once.

Governors also can’t be removed for policy disagreements and can only be ousted “for cause,” which has been interpreted to mean gross neglect of duty or malfeasance.

Regional Fed presidents are also not politically appointed, and the Fed funds its own operations without appropriations from lawmakers.

That’s why Fed independence is a tricky concept, Michael Pugliese, senior economist at Wells Fargo, told Fortune, as it largely derives from a mix of laws, norms, informal agreements and traditions.

“It’s not like there’s an independence clause,” he said. “It’s more that the structure itself is built a little bit independent of the political system.”

Pugliese thinks it’s highly unlikely Congress will amend the Federal Reserve Act to allow for more explicit influence from the White House.

That’s because Democrats wouldn’t go along with it, and Republicans probably wouldn’t get rid of the filibuster rule in the Senate to immediately erode the Fed’s independence, he said.

“Getting rid of the filibuster would probably open the door to tons and tons and tons of other policy discussions on a lot of different issues, not just the Federal Reserve Act.” Pugliese explained. “The filibuster has stuck around as long as it has because both parties have had reasons and cause to not change it. And maybe that changes one day, but I would be very surprised if the thing that changed it was the Fed.”

This story was originally featured on Fortune.com

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• The weak jobs report for July and steep downward revisions for prior months revealed a sharp decline in labor demand that’s suggestive of a recession, JPMorgan warned. Elsewhere in the data, an increase in unemployment among college graduates as well as a decline in staffing at business services firms could be hints that AI is impacting jobs.

The jobs report that delivered a stunning wake-up call to Wall Street on Friday also contained a recession signal and more indications that AI is weighing on employment.

Payrolls grew by just 73,000 last month, well below forecasts for about 100,000. Meanwhile, May’s tally was cut from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, meaning the average gain over the past three months is now only 35,000.

To be sure, the weak jobs numbers do not mean there are mass layoffs. Other datasets like weekly jobless claims and monthly job-turnover surveys back that up. At the same time, wages and workweeks are still rising.

“But the comfort garnered from this news is dominated by a sharp hiring slowdown sending a stall speed alert,” JPMorgan economists wrote in a note late Friday.

In particular, hiring in the private sector has slowed to an average of just 52,000 in the last three months, with sectors outside health and education stagnating.

Coupled with the lack of any signs that unwanted separations are surging due to immigration policy, this is a strong signal that business demand for labor has cooled, they explained.

“We have consistently emphasized that a slide in labor demand of this magnitude is a recession warning signal,” JPMorgan added. “Firms normally maintain hiring gains through growth downshifts they perceive as transitory. In episodes when labor demand slides with a growth downshift, it is often a precursor to retrenchment.”

For now, the overall economic numbers still show expansion, albeit at a slower pace. GDP rebounded more robustly than expected in the second quarter, hitting 3%, though a metric that strips out the impact of foreign trade and looks instead at final domestic demand indicated slowing. And for the third quarter, the Atlanta Fed’s GDP tracker points to growth decelerating to 2.1%.

JPMorgan also warned the depressed pace of job growth is unlikely to sustain income gains or consumer confidence, which has bounced back in recent months.

Meanwhile, the broader U-6 gauge of unemployment—which includes people who haven’t looked for work recently but are still interested in finding a job as well as people who are involuntarily working part time and would prefer a full-time role—has climbed by 0.4 percentage points this year.

By contrast, the headline unemployment rate has barely changed, bouncing in a tight range between 4% and 4.2% for more than a year.

Until Friday’s shocker, that has helped give the impression that the job market has been resilient in the face of steep tariff hikes from President Donald Trump.

“We think job creation is no longer appropriately described as solid,” JPMorgan said. “Together with building drags from the trade war, this week’s news supports our view that the Fed is moving closer to easing.”

A separate note from JPMorgan also highlighted more details buried in the jobs report that suggest AI is having an impact on the labor market.

For example, payrolls at professional and business services firms have been trending lower and fell by 14,000 last month.

In addition, the unemployment rate for college-educated workers rose to 2.7% from 2.5%, while the overall unemployment rate ticked up to 4.2% from 4.1%.

“New entrants appear to have accounted for an unusually large share of the increase in the unemployed last month,” JPMorgan said.

That follows earlier alarms about the use of AI reducing the need for entry-level jobs, a critical stepping stone for recent college graduates looking to launch their careers.

But last month, top economist Brad DeLong argued in a recent essay that the challenges confronting young job-seekers today are primarily driven by widespread policy uncertainty and a sluggish economy—not by the rapid rise of AI tools.

Uncertainty causes companies to delay major decisions, including hiring, in the face of an unpredictable policy environment, which has been whipsawed by Trump’s on-again, off-again trade war. 

“This risk aversion is particularly damaging for those at the start of their careers, who rely on a steady flow of entry-level openings to get a foot in the door,” he wrote.

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• Berkshire Hathaway’s second-quarter results showed that the conglomerate remained a net seller of stocks and continued to accumulate cash. That period includes the head-spinning stock market plunge and rebound following President Donald Trump’s rollout of aggressive tariffs on “Liberation Day” in April.

Warren Buffett’s Berkshire Hathaway largely remained on the sidelines last quarter, even as the stock market cratered on President Donald Trump’s “Liberation Day” tariffs and briefly presented steep bargains.

Second-quarter results released on Saturday revealed that the conglomerate was a net seller of stocks for the 11th straight quarter. Berkshire offloaded $6.92 billion during the quarter and bought $3.9 billion.

Meanwhile, Buffett’s cash pile kept getting bigger, hitting a fresh high of $344 billion at the end of June, up from $333 billion at the end of March. Berkshire also refrained from stock repurchases for the fourth consecutive quarter.

The legendary value-conscious investor has bemoaned the lack of good deals for years now. That includes possibilities for large acquisitions of companies that could be folded into Berkshire as well as major stock purchases for the portfolio.

At the same time, Buffett has also avoided knee-jerk moves, and the stock market saw a head-spinning plunge and rebound in April as Trump shocked Wall Street with his aggressive tariffs then put them on hold just days later.

During the selloff, the S&P 500 flirted with bear market territory, diving nearly 20% from its prior high. But the index has since shot back up to fresh records.

Still, the swoon also highlighted Buffett’s uncanny timing, as he appeared to anticipate a market downturn last year by selling $134 billion in equities in 2024—when the bull market was still raging.

The stock market swings also came as Buffett was contemplating a transition away from his leadership role. In May, he announced that his anointed successor, Greg Abel, should take over as Berkshire Hathaway CEO by the of the year.

While Buffett is expected to stay on as chairman, he may be staying away from dramatic moves to clear the decks for Abel, who had already been taking on a bigger leadership role before May.

Despite his aversion for major purchases lately, Buffett’s annual letter to shareholders in February reaffirmed his commitment to staying invested in stocks and companies, even as cash continued to mount.

“Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities—mostly American equities although many of these will have international operations of significance,” he wrote. “Berkshire will never prefer ownership of cash-equivalent assets over the ownership of good businesses, whether controlled or only partially owned.”

Berkshire also reported that its operating earnings, which exclude the impact of its investments, fell 4% to $11.16 billion in the second quarter as insurance-underwriting results weakened. The company booked a $3.8 billion impairment on its Kraft Heinz stake as well, marking down its value to $8.4 billion.

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• U.S. payrolls grew by just 73,000 last month, well below forecasts, but downward revisions to prior months stunned Wall Street even more, showing that the labor market was much weaker over the spring. That may prompt the Federal Reserve to lower rates sooner rather than later, which President Donald Trump has been demanding for months.

The U.S. labor market looks much weaker than previously thought, and Wall Street now expects the Federal Reserve to resume rate cuts sooner rather than later.

The Labor Department reported Friday that payrolls grew by just 73,000 last month, well below forecasts for about 100,000.

But downward revisions for prior months shocked investors even more, revealing that the labor market came to a near standstill over the spring. May’s tally was cut from 144,000 to 19,000, and June’s total was slashed from 147,000 to just 14,000, resulting in a combined cut of 258,000. The average gain over the past three months is now only 35,000.

The massive revisions prompted President Donald Trump to fire the head of the federal agency that puts out the payroll data, Erika McEntarfer, commissioner of the Bureau of Labor Statistics. The data reprint was so bad that Eric Pachman, chief analytics officer at Bancreek Capital Advisors, noted that while July’s 73,000 looks comparatively like good news, “how can we even trust this number now?”

The jobs report came just days after the Fed kept rates steady again, with Chair Jerome Powell signaling a continued desire to wait for more data to see how President Donald Trump’s tariffs would impact inflation, which is still running above the central bank’s 2% target.

“Powell is going to regret holding rates steady this week,” Jamie Cox, managing partner at Harris Financial Group, said in a note. “September is a lock for a rate cut, and it might even be a 50-basis-point move to make up the lost time.”

The unemployment rate also edged up to 4.2% from 4.1%, even as the labor force shrank. Meanwhile, U.S. factories continued to slump and cut 11,000 jobs last month after shedding 15,000 in June and 11,000 in May amid uncertainty over Trump’s trade war.

Stocks plummeted on the jobs data, with the S&P 500 down 1.6% and the Nasdaq down 2.2%. The 10-year Treasury yield sank more than 15 basis points to 4.208% as Wall Street priced in a rate cut at the Fed’s meeting next month and more later in the year. The yield on the two-year Treasury, which is more sensitive to Fed rates, plunged almost 27 basis points.

Markets were slumping before the jobs data as Trump announced fresh tariff rates on U.S. trading partners, with some higher than before, as well as an additional 40% duty for all transshipped goods.

After the jobs report, Trump reiterated his monthslong demand for the Fed to lower rates, while Cleveland Fed President Beth Hammack stood by the central bank’s decision on Wednesday to keep policy steady.

Still, Wall Street noted that the revisions put the labor market in a starkly different light, after it looked remarkably resilient since Trump launched his trade war.

“Headline NFP [nonfarm payroll] at 73K is a miss, but perhaps more concerning is –258K net revisions to the prior two months. These revisions put May’s headline NFP at 19K and June’s at 14K,” Adam Hetts, global head of multi-asset and portfolio manager at Janus Henderson Investors, said in a note. “Had those figures been the initial prints a month or two ago it would have significantly changed the labor market narrative over the entire summer. Indeed, odds of a September rate cut are increasing significantly on the back of this data release.”

Labor supply vs. demand

Other analysts noted that other details don’t suggest there’s a total collapse in employment. The unemployment rate hasn’t changed much for a while. Wages are still growing at a healthy clip, putting more money in consumers’ wallets.

Meanwhile, weekly job claims data has been steady overall, too, meaning there hasn’t been a widespread surge in layoffs.

A critical question is whether the muted job gains are the result of slow labor supply or slow demand. Supply has taken a big hit since Trump launched his immigration crackdown, and Friday’s payroll report showed that the number of foreign-born workers in the labor force has shrunk by 1.2 million in the past six months.

As a result, even a tepid uptick in hiring will barely move the needle on the jobless rate. In fact, Powell suggested on Wednesday that the unemployment rate merits closer attention than the payroll number since less demand is needed to offset supply.

Whether supply or demand is the culprit has major implications for the Fed, according to Preston Caldwell, chief U.S. economist at Morningstar.

“The Fed has no reason to loosen monetary policy in response to a decline in job growth driven by labor supply—as such a decline is neither deflationary nor does it create a gap with respect to maximum sustainable employment,” he wrote in a note. “On the other hand, the speed of the deceleration in job growth, along with uncertainty about what exactly the data means, should be alarming to the Fed, and argues strongly for a September cut as a prophylactic measure at the least.”

But Bill Adams, chief economist for Comerica Bank, noted that Trump’s tariffs are still putting upward pressure on inflation, making it less clear-cut that the Fed will ease policy soon.

He also pointed to labor supply, specifically that the overall labor force has fallen for three consecutive months. Fed policymakers will see another jobs report before their September meeting.

“If it shows labor supply declined again and held the unemployment rate steady while tariffs push up inflation, the Fed is likely to hold interest rates steady again,” Adams wrote in a note.

This story was originally featured on Fortune.com

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